When you decide it’s time to exit your business, there are three initial steps to preparing your business for sale:
- Set goals (when, how much you hope to sell it, the ideal buyer, your current role);
- Assess the readiness of the business for sale, including obtaining a formal appraisal;
- Make improvements to maximize business value.
After going through these stages, the next stage is to find a buyer. Here are nine ways to find potential buyers for your business.
Look for an inner person
To start, decide if someone who works in your business right now might be the right buyer. Selling to the internal buyer provides continuity to clients or customers. Also, the in-house person is familiar with operations, procedures, vendors, and the team. However, there are some challenges to this approach as well.
For example, is the successor capable of taking over from you? Does he have the funds to buy your business? If not, you will likely be using seller financing to allow them to purchase the business, and this approach carries additional risk. For example, if the successor mismanages the business, it may lose value or even fail. You can get back in business.
ESOP option
As an alternative to selling your business to one or two people on your team, if your business is large enough, an Employee Stock Option Plan (ESOP) can also be purchased. With an ESOP, all employees have the opportunity to buy into the business. In general, your annual business revenue must be over $10 million for an ESOP to work.
Search your network
If no one inside your company can be a potential buyer, then you will be out. Start with your network. You can access your personal and professional network and see if they know someone who might be interested in buying your business. Friends, family, colleagues and industry contacts may know someone who is interested in buying a business like yours. Be sure to ask your CPA, banker, and business attorney if they know one.
Market competitors
You can also market your business to direct competitors. Competitors may be interested in acquiring your business to expand their market share, acquire new customers, or acquire unique assets.
Target strategic buyers
You also need to target strategic buyers. Think about companies that provide services or products to your customers right before or right after the customer uses your services or buys your product. These companies can benefit from getting your business. They may be looking to expand into your region, diversify their offerings, or integrate your technology.
For example, if you have a coaching business in the healthcare industry, is there an executive recruiting business that might want to get into the coaching business?
Attend industry events
Attend trade shows, conferences and networking events in your industry. These events are convenient places to meet potential buyers. Some contributors have bought businesses and may be interested in buying yours.
Engage a business broker
On the one hand, business brokers have access to a wide range of potential buyers and can match you with individuals or companies looking for opportunities in your industry. On the other hand, business brokers are not ideal partners for you. I discussed the pros and cons business brokers can be found in an earlier article here.
reach Exit to private equity companies
This may be a long-term option for most of us (How many private equity firms do you know?). But it’s worth a try because private equity firms are interested in acquiring small businesses with growth potential. Research companies that focus on your industry or region and ask your CPA and banker if they have connections in the private equity world.
Use online marketplaces
Be careful when using an online marketplace to protect your privacy. However, you can list your business on online marketplaces like BizBuySell, BusinessBroker.net, or Flippa, where potential buyers are actively looking for businesses to buy.
When it’s time to sell your small business, finding the right buyer is critical to ensuring a successful transition. In this article, I’ve listed strategies to help you identify potential buyers, from your personal network to using online marketplaces to engaging a business broker. Use these ideas to guide you through the process and help you connect with buyers who are truly interested in your business.
Let’s talk.
Have you discovered other successful ways to find potential buyers? I would love to hear from you. Look around your industry, see what other business owners have done to market their business, and share your insights with me in the comments section below.
